UNBLF - Unibail-Rodamco-Westfield SE (UNBLF) Q4 2023 Earnings Call Transcript

2024-02-08 19:17:06 ET

Unibail-Rodamco-Westfield SE (UNBLF)

Q4 2023 Results Conference Call

February 08, 2024 04:00 AM ET

Company Participants

Jean-Marie Tritant - Chief Executive Officer

Fabrice Mouchel - Chief Financial Officer

Conference Call Participants

Frederic Renard - Kepler Cheuvreux

Pierre Clouard - Jefferies

Jonathan Kownator - Goldman Sachs

Paul May - Barclays

Joubert Laroche - Oddo

Rob Jones - BNP Paribas

Bruno Duclos - Invest Securities

Presentation

Jean-Marie Tritant

Good morning, and welcome to Unibail-Rodamco-Westfield's 2023 Full Year Results Presentation.

In 2023, we delivered strong operational performance across all activities. This performance was driven by dynamic leasing activity and indexation in Continental Europe at 6.5%, which has contributed to an adjusted recurring earnings per share of €9.62, above our full year guidance. During the year, we made further deleveraging progress in a challenging investment market, securing 11 transactions worth €1 billion. Disposals since 2021 have contributed €5.1 billion to the IFRS net debt reduction with net debt now below €20 billion for the first time since 2018.In 2023, we also strengthened our balance sheet by successfully executing a first of its kind exchange of our hybrid bond. This maintained our credit rating and our continued access to the bond market access that was confirmed in December when we successfully issued another subscribed €750 million green bond.

These transactions show continued debt investor confidence and our ability to execute well-managed strategic activity in the market. The improved visibility of our operating performance, the delivery of major development projects in 2024 and our strong liquidity position give us the confidence to reinstate shareholder distributions. We will propose a cash payment of €2.50 per share for approval at our AGM in April.

Let's go deeper into the group's robust financial performance. With a 6.7% increase versus 2022, our like-for-like group EBITDA is now back to 2019 levels, ahead of the target set at our 2022 Investor Day. Our adjusted recurring earnings per share is up 3.3% year-on-year.

And in 2023, our deleveraging progress has delivered a production-forma reduction in IFRS net debt of almost €1 billion. This net debt reduction, combined with our strong EBITDA drives our net debt-to-EBITDA ratio down to 9.3x, a significant improvement from 9.9x in 2019.These results are primarily enabled by our strong shopping center performance. Tenant sales grew by 6.4% in 2023, ahead of core inflation, supported by footfall growth, which is up almost 5%. This footfall has been mainly driven by the positive evolution of our retail mix and decreasing vacancy since the peak of COVID. We are confident that we'll continue this trend based on our 2023 leasing activity, which improved vacancy by 110 basis points back to 2019 levels.

Through proactive management, we have signed a higher volume of long-term deals and secured more MGR. Long-term leases represent 78% of the MGR signed last year, up 5 points from 2022. And overall, the group's MGR uplift on all leasing activity was 6.8% on top of indexation.

Let's look at footfall and sales more closely, starting with the U.S. on the right of the slide. We see a positive performance in terms of footfall and sales, both up 3% on a strong 2022 base.

Excluding luxury, which accounts for 14% of our portfolio sales, but represents less than 1% in the overall U.S. retail goods market. Sales are up 4.8% versus last year. In the context of growing sales, the decrease in sales-based rent seen here is mainly linked to the successful conversion into higher MGR as part of our leasing activity.

Following the positive evolution of footfall, other variable income in the U.S. has continued to grow, with Retail Media revenues up 12% in 2023, sorry, on a like-for-like basis.

In Europe, where Q1 2022 was still impacted by some COVID restrictions, footfall is up 5.2% and tenant sales up 7.5%. When compared to blending national sales indices for the European markets in which we operate, our performance suggests we are gaining market share. Sales-based rents are up on the back of this increasing sales. As with the U.S. to mitigate the impact of COVID, we signed more short-term deals with a higher variable component in Europe....

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